Edited version of private advice

Authorisation Number: 1052171939881

Date of advice: 26 September 2023

Ruling

Subject: Commissioner's discrefion - deceased estate

Question

Will the Commissioner exercise the discretion in subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the time limit to enable you to apply the small business 15-year exemption to disregard the capital gain you made on the disposal of the interest in the property you inherited from your spouse that they acquired after 19 September 1985?

Answer

Yes. Having considered your circumstances and the relevant factors the Commissioner will exercise the discretion in subsection 152-80(3) of the ITAA 1997 and extend the time limit.

This ruling applies for the following period:

Year ended 30 June 2021

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

You and your spouse jointly acquired an interest (as tenants in common) in farmland prior to September 1985.

You and your spouse jointly acquired a further interest in the farmland prior to September 1985, giving you and your spouse a X% joint interest in the land. The remaining X% was owned by an unrelated party.

The Property was subdivided into 2 blocks after September 1985, Block A and Block B. So that you and your spouse and the owners of the remaining X% interest in the land could each own one block outright, you disposed of your X% interest in Block B to the other owners and acquired their X% interest in Block A.

Following the subdivision and transfer you and your spouse jointly owned Block A (the Property).

You and your spouse signed a Deed of Agreement with the owners of the remaining X% in the year ended 30 June 1991 granting them the first option to purchase the Property should you wish to sell it.

The owners of the remaining X% lodged a caveat on the Property after the Deed of Agreement was entered into.

The Property was used as an active asset of a farming partnership between you and the deceased for more than 7½ years.

Your spouse (the deceased) passed away in the year ended 30 June 2019.

Prior to the passing of the deceased, you made the family aware of your desire to sell the farm and your home to move closer to your family.

The deceased's interests in the Property passed to you by survivorship, including the X% interest (which is the subject of this ruling) they acquired in the year ended 30 June 1991.

A beneficiary of the estates exercised their right of first option to purchase the Property.

You sold the Property by contract in the year ended 30 June 2021.

You made a capital gain on the disposal of the X% interest in the Property that you inherited from your spouse that they acquired in the year ended 30 June 1991.

The deceased was over 55 years of age at the time of their passing.

The net value of the capital gains tax assets of the deceased, any entities connected with the deceased, their affiliates or entities connected with their affiliates did not exceed $Xmillion just before their passing.

You were unable to sell the Property until the right of first option was either exercised or declined and the Caveat lifted from the Property. This took some time as the beneficiary had to sell another property before they would exercise their right of first option to purchase.

The sale of the Property was also impacted by the COVID-19 pandemic.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80

Income Tax Assessment Act 1997 subsection 152-80(3)